A perfect 850 credit score is often seen as the pinnacle of financial achievement. It represents the highest possible score in the FICO and VantageScore models, which are widely used by lenders to assess a person’s creditworthiness. While a perfect score can be a powerful tool for securing the best interest rates and loan terms, it is also shrouded in myths and misconceptions. Understanding these myths is crucial for anyone striving to improve their credit or simply aiming to maintain a good score.
In this article, we will explore some of the most common myths surrounding the 850 credit score. We will also answer the burning question: How many Americans have a perfect 850 credit score? by debunking these myths, we aim to provide a clearer understanding of what it takes to achieve and maintain an excellent credit score, and whether or not the elusive 850 is something worth obsessing over.
Myth 1: You Need a Perfect 850 Credit Score to Get the Best Interest Rates
One of the most pervasive myths is that you need an 850 credit score to qualify for the best interest rates on loans and credit cards. While a higher credit score certainly helps in securing better rates, the truth is that the benefits begin to plateau once you reach a certain threshold.
Most lenders categorize scores above 750 or 760 as “excellent,” meaning that people with scores in this range are already eligible for the best rates and terms. Whether you have a score of 780, 800, or 850, the difference in interest rates offered by lenders is often negligible. Therefore, while having a perfect score is impressive, it is not necessary for securing favorable loan terms.
Myth 2: Achieving an 850 Credit Score Is Impossible
Many people believe that achieving an 850 credit score is nearly impossible, but this is simply not true. While it is challenging and requires a consistent, long-term effort, many people do manage to attain this perfect score.
The key to achieving a perfect score lies in understanding how credit scoring models work and aligning your financial habits with those principles. Factors such as a long credit history, diverse credit mix, low credit utilization, and a history of on-time payments all contribute to a high score. While it may take years of responsible credit use to reach 850, it is by no means out of reach for those who are disciplined and patient.
Myth 3: Having an 850 Credit Score Is Permanent
Another myth is that once you achieve an 850 credit score, you can maintain it forever without much effort. This is a dangerous misconception because credit scores are dynamic and can change based on your financial behavior.
For example, if you suddenly take on a large amount of debt or miss a payment, your credit score could drop significantly, even if you previously had a perfect score. Maintaining an 850 score requires ongoing attention to your credit usage, payment history, and other factors that impact your credit profile. In other words, reaching an 850 score is just one part of the journey; keeping it requires continuous effort.
Myth 4: Only the Wealthy Can Achieve an 850 Credit Score
It is often assumed that only wealthy individuals can achieve a perfect credit score, but this is not necessarily true. While having a higher income can make it easier to manage debt and avoid missed payments, income is not a factor directly considered in credit scoring models.
People of various income levels can achieve an 850 credit score by managing their credit responsibly. This includes paying bills on time, keeping credit card balances low, and maintaining a long and varied credit history. Financial discipline and knowledge about how credit works are more critical than income in achieving a high credit score.
Myth 5: An 850 Credit Score Guarantees Loan Approval
Some people believe that having an 850 credit score guarantees automatic approval for any loan or credit application. While a perfect credit score is an asset, it does not guarantee that a lender will approve every application.
Lenders consider various factors when making lending decisions, including income, debt-to-income ratio, and employment history. Even with a perfect credit score, you could be denied a loan if a lender determines that your income is insufficient to cover the loan payments or if your debt-to-income ratio is too high.
Myth 6: Having a Perfect Credit Score Means You Shouldn’t Take on New Credit
A common misconception is that once you have a perfect credit score, you should avoid taking on any new credit to maintain it. While it is true that opening new accounts can temporarily lower your score due to hard inquiries, avoiding new credit altogether can be counterproductive.
Having a diverse mix of credit accounts, including both revolving credit (like credit cards) and installment loans (like car loans or mortgages), is one of the factors that contribute to a high credit score. Therefore, responsibly taking on new credit, when necessary, can actually help maintain or even improve your score over time.
Myth 7: You Should Aim for a Perfect 850 Score No Matter What
Many people believe that achieving an 850 credit score should be the ultimate goal. While having a perfect score is certainly an admirable accomplishment, it is not necessary for everyone.
In reality, once you reach a score in the upper 700s or low 800s, you are already in excellent credit territory and will likely qualify for the best rates and terms available. Obsessing over reaching 850 can lead to unnecessary stress and potentially risky financial behavior, such as keeping accounts open longer than needed or taking on credit you don’t really need.
Myth 8: Credit Scores Reflect Your Financial Worth
Some people mistakenly believe that a credit score reflects their overall financial worth or responsibility. While credit scores are an important measure of creditworthiness, they do not account for many other aspects of financial health, such as savings, investments, or income.
Credit scores are designed to predict the likelihood that a person will repay borrowed money. They do not measure your ability to save for retirement, invest in the stock market, or manage your overall financial well-being. Therefore, it is essential to view credit scores as just one part of your financial picture.
Myth 9: Checking Your Own Credit Score Will Lower It
Many people avoid checking their credit scores because they believe it will lower their score. This myth likely stems from confusion between a “hard inquiry” and a “soft inquiry.”
When you check your own credit score, it is considered a soft inquiry, which does not impact your score. Hard inquiries, on the other hand, occur when a lender checks your credit as part of a loan application, and these can slightly lower your score. Regularly checking your own credit score is actually a good practice because it allows you to monitor your progress and detect any potential errors or signs of identity theft.
Myth 10: Closing Old Credit Accounts Will Improve Your Credit Score
Another common myth is that closing old or unused credit accounts will improve your credit score. In reality, closing old accounts can actually hurt your score because it can reduce the length of your credit history and increase your credit utilization ratio.
Length of credit history accounts for a significant portion of your credit score, so closing an account you’ve had for a long time can shorten your average account age and negatively impact your score. Additionally, closing an account reduces your available credit, which can increase your credit utilization ratio if you carry balances on other cards. It is often better to keep old accounts open, even if you don’t use them regularly.
